Kensington Swan's view on aspects of the construction industry

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How much uncertainty do you need before something is uncertain?

Stupid question right? Well, maybe not such a stupid question from a legal sense.

There is a rule of contractual construction that where a term is too uncertain it will be deemed void for uncertainty. The courts can live with a little bit of uncertainty, but when the uncertainty means that it is not possible to determine what the parties intend; or where it is not safe to prefer one possible meaning to another equally possible meaning; then the relevant provision will be void. The consequences are significant and therefore the courts are reluctant to find a provision void for uncertainty.

To provide some context, this question was considered in Vinci Construction v Beumer (UKHC) which related to a baggage handling system at Gatwick. Vinci was the head contractor and entered a subcontract with Beumer to carry out the detailed design, manufacture, fabrication, supply, delivery, offloading, installation, testing, commissioning and user training in respect of the baggage handling system. A liquidated damages schedule was prepared which included the following:

Baggage

12 May 2015

£22,500/calendar day

Remaining Works

27 May 2015

£22,500/calendar day

Neither ‘Baggage’ or ‘Remaining Works’ was defined and disputes arose around which contract tasks fell within each section. While this distinction was not entirely clear on an initial reading of the contract, once the context was considered the High Court was able to find sufficient certainty around the task allocations. The result being that the liquidated damages provision was enforceable and was not void for uncertainty.

So what can you take away from this post:

Spend time at the contractual drafting stage to ensure all contract provisions are clear – Aside from the risk that these might be void if uncertain, it is important that all parties clearly understand their rights and obligations when entering the contract.

There is a high threshold to meet before a provision will be void for uncertainty – If uncertainty is identified it is sensible to discuss and try to clarify this with the other party. In Vinci the parties had already been through an adjudication before the declaratory relief application (which involved a QC on each side) was made to the High Court; a situation I’m sure both parties would have preferred to have avoided.